State's plan for MRT 3: Takeover then complete overhaul by 2016

Posted at 08/28/14 8:11 AM

First of two parts

MANILA -- The government plans to takeover the most-congested railway system in the country by 2016, an ambitious venture that would pave way for the complete overhaul of the train line.

But is the government, which earmarked roughly P54 billion for the complete buyout of the corporate owner of the Metro Rail Transit (MRT) Line 3, confident of executing this venture despite uncertainties hounding the plan?

Transportation Assistant Secretary Jaime Fortunato A. Caringal believes so, citing the government’s lion’s share in the board of the MRT Corp. (MRTC), the corporate entity that owns the assets of the railway system.

He explained that the key step for the complete takeover of the line is to execute a compromise agreement with the concessionaire to end an ongoing arbitration case in Singapore.

“The interim step is to enter into a compromise agreement with MRTC, then proceed with the execution of the buyout,” Caringal said in an interview.

He expressed his confidence that the private company would agree to the government’s proposal.

“The government controls the board, majority of the members seated in the MRTC board are from the government. We hope that our control of the board would pave the way for an easy buyout,” he said.

The execution of the compromise agreement is seen to be completed by September this year.

“A third-quarter target is a very optimistic assessment. The best scenario is by year-end—that is if no cases will be filed against us,” he said. “We are also in discussions with the Office of the Solicitor General [OSG] on how best to proceed.”

MRTC, the concessionaire controlled by the Sobrepeña family, owns the assets of the railway line under a 25-year build-lease-transfer agreement, which mandates the government to pay an annual P7-billion fee in equity-rental costs for the state to operate the line.

Ahead of the buyout plan, the government has earmarked a P6.6-billion subsidy for the railway line for 2015.

‘Hoping and praying’

Caringal clarified that the full takeover of the railway line by the government will take about a year and a half, or up until President Aquino steps out from office in June 2016.

“I’m hoping and praying that we could complete the takeover of the line even before 2016. There are a lot of stumbling blocks that are hindering us from easily executing this plan,” he said.

Caringal was referring to the myriad of cases filed by businessman Robert John “Bob” L. Sobrepeña,
one of the major stakeholders in the parent company of MRTC.

MRTC is owned by MRT Holdings II Inc. (MRTH-II), which in turn is owned by MRT Holdings Inc. (MRTH).


Uninformed owners

But could the government really take over the line by 2016? Could it even enter into a compromise agreement by September?

An MRTH executive was lukewarm about it.

“The government is not even discussing its proposal to us, the owners of MRTC. Who they are talking to are the government representatives, not the owners,” MRTH Vice President Frederick C. Parayno told the BusinessMirror in a phone interview.

He said the owners found themselves dumbfounded of the government’s plan with the line.

The government representatives that Parayno was referring to were bond holders Land Bank of the Philippines and the Development Bank of the Philippines (DPB), two state banks that own roughly 80 percent in economic interest in the line.

He then called on the government to schedule a meeting with the Sobrepena Group to discuss and possibly meet at a certain point to set things straight. “We are open to meeting with the government and to discuss the possible plans that they would want to pursue,” he said, referring to the buyout of the line.

He noted, however, that the P54 billion that the government has earmarked for the takeover of the line only represents the amount for the acquisition of MRTC’s bonds.

“Back in 2009, when the arbitration case in Singapore started, the price of the line was already pegged at $2.5 billion [roughly P110 billion]. This could have ballooned by this time,” the businessman said.


P6B for MRT improvement

“One more thing: the government is pumping in money to the line, but there will be no improvements to be seen,” Parayno lamented.

The most-congested railway line in the country has not seen any improvement since it was built 15 years ago. The line’s management has been under fire recently for mishaps and accidents. The worst one happened two weeks ago, when a wayward train rammed against a concrete barrier at the southernmost station in Pasay City.

Transportation Secretary Joseph Emilio A. Abaya insisted that the accident was a result of human error. Four employees—two drivers and two control center personnel—will be charged with administrative cases, with the possibility of losing their retirement benefits at the worst.

In view of this, the agency will soon auction off a P6-billion project for the complete makeover of the train line.

This involves track rehabilitation, the procurement of a new signaling system and communications technology, among others.

Separate from this is the procurement of a new maintenance provider.

The government plans to auction off within the next few weeks an expanded maintenance contract of the train system, extending the concession period from one year to three years to ensure that the upkeep of the system is constant.

Autre Porte Technique Global Inc. (APT Global) currently holds the contract for the maintenance of the railway line. The contract will expire on September 5.

MRT 3 has a rated capacity of only 350,000 passengers a day, but is servicing an average of 500,000 commuters daily. It operates a fleet of 73 light-rail vehicles, which run at a maximum speed of 40 kilometers per hour to cover the rail system’s 13 stations in about 45 minutes.

To be continued.